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Sunday, February 22, 2015

Mayweather-Pacquiao and the Role of Big Money

In a rarity, all was right in the boxing world on Friday as Floyd
Mayweather and Manny Pacquiao finally agreed to fight after more than five
years of on-and-off negotiations. And this was not an easy negotiation. HBO and
Showtime, who have exclusive contracts with Pacquiao and Mayweather,
respectively, only work together when compelled to do so. Promoter Bob Arum and
power broker Al Haymon, bitter rivals and two of the shrewdest minds in the
sport, sat on opposite sides of the table. Lingering animosity still
characterized the relationship between Arum and his former fighter, Mayweather.
Each boxer had a significant financial minimum, a reputational stake and
other sources of ego to assuage. In the background of the negotiations was Team
Mayweather's suspicions about Pacquiao and performance enhancing drugs, an
issue they were so concerned about that settling a defamation suit didn't fully
tamper down aspersions and accusations (although now the talk has shifted to
veiled innuendo).

Mayweather-Pacquiao was never inevitable. Over the past 30 years,
fighters have ignored huge financial opportunities for one reason or another.
Marvin Hagler walked away from the sport after his disputed loss to Sugar Ray
Leonard. Lennox Lewis also chose to retire instead of engaging in a lucrative
second fight with Vitali Klitschko. Roy Jones and Bernard Hopkins talked
themselves out of a rematch in their primes. Joe Calzaghe left the sport at the
peak of his earning potential. Winky Wright could've put his great grandkids through
college with the money that he turned down. Somehow, Oscar de la Hoya and Felix
Trinidad left a second bout on the table.

Boxing isn't always about fighters jumping at money. From Deontay
Wilder, Keith Thurman and Peter Quillin rejecting career-high paydays to Juan
Manuel Marquez going to Indonesia for short money instead of facing Pacquiao again,
boxers consistently make decisions that are predicated on factors besides the
almighty dollar. Vitali Klitschko could still be making millions boxing but
he's helping Ukraine stabilize its democracy. David Haye is choosing to do
whatever David Haye does, outside of fighting in the ring.

Purse splits ultimately weren't the main hindrance in getting boxing's ultimate dream matchup finalized. Mayweather-Pacquiao would have been the biggest paydays of
the fighters' careers if it were made in 2009, 2010, 2012, 2014 or at any point
along the negotiations. Other factors, like marketing plans and budgets, ticket
disbursement, drug testing and rebroadcast rights played just as essential a
role in this negotiation as the financial splits for the fighters did.

In my estimation, the large forces of capitalism that exerted pressure on the fight to get made were essential in finalizing the negotiations. Yes, either fighter still could've walked away, but options were limited
and BIG MONEY, the money behind Money Mayweather, for instance, was getting
itchy. Ultimately, both fighters deserve praise for pulling the trigger. However, I believe that if
the background elements all weren't aligned in seeing this matchup agreed to, then boxing's ultimate pageant would remain a pipe dream.

Let's stick to what's widely reported. Showtime and CBS have
Mayweather signed to a six-fight deal with a minimum guarantee of $32M per
fight. Through the first four fights of the deal, Mayweather had one huge
financial triumph (Alvarez) and three fights that failed to galvanize the
larger sporting world (Guerrero and Maidana I and II). Over the duration of
this deal, Showtime ceased to disseminate pay per view figures but it's been
widely reported in the industry that the two Maidana fights underperformed at
the box office. Coming into this year, CBS was still on the hook for
$64M dollars without credible or compelling opponents for Mayweather; that's a lot of
potential downside risk for a corporation.

Similarly, Pacquiao has been guaranteed at least $20M per fight by Top
Rank (Bob Arum's promotional company). HBO and Top Rank have seen Pacquiao's pay per view numbers plummet after
his loss to Juan Manuel Marquez. His fights in Macau, China may have somehow
turned a profit for Top Rank but they have helped to diminish Pacquiao's
popularity in the U.S. market. Like Mayweather, Pacquiao also faced a
dearth of quality potential – and available – opponents. Still owing Pacquiao at least three more fights, Top Rank couldn't afford to see its prized asset continue to depreciate.

The third key player in the mix is boxing power broker Al Haymon,
who, with significant financial muscle behind him, has brought boxing back to
network television through large time buys on NBC and CBS. (Time buys are a term for an outside entity paying a network for programming time. The typical situation is the
reverse, where a network pays for the right to broadcast content). Haymon, a
key member of Mayweather's brain trust, needs boxing's profile to grow in the
United States for his network deals to succeed. The attention that a
Mayweather-Pacquiao fight could bestow upon the sport and his fighters in
particular could be incalculable. Haymon has two years with NBC to provide
certain ratings levels so that for the next deal, television rights for boxing
can become a competitively bid process among the major networks, leading to
significant profits for him and his backers. For Haymon, Mayweather-Pacquiao is a key ingredient to increasing boxing's exposure.

Finally, HBO and Showtime needed this fight to happen to reassert their
dominant positions within the sport. The premium cable networks are aware of
the massive broadcasting changes in boxing. Instead of just squaring off
against each other, soon they will have further competition from NBC, ESPN and
potentially other players. HBO and Showtime have built up brands, cultivated subscriber bases and provided the central boxing narratives in
the North American market for decades. Although an intense rivalry
exists between the networks, for this fight, their interests align perfectly. This
fight was paramount in maintaining their preeminent roles within boxing.

Ultimately, the forces around Mayweather and Pacquiao truly
desired this fight to happen and for it to happen now. Huge corporations, the
largest promoter in the U.S., a private-equity backed power broker and the constant drumbeat from the media and fight fans all
helped to make this singular event possible.

If Mayweather or Pacquiao were looking for external reasons or
excuses for the fight to fall through, they were out of luck. There were no
more promoters or drug testing or networks or managers to hide behind. If the
fight didn't happen, blame would be placed solely on the fighters.

It's
certainly possible that it took more than five years for the needs of the fight's key
stakeholders to align. Luckily, for the health, relevance and legacy of the
sport, its two largest icons have agreed to battle, and at a point close to
their respective primes. No matter what happens in the event, this is a
significant win for boxing. The time was right on all sides. Ultimately, the
60-40 financial split for Mayweather was not what led to the deal being
completed; it was the will of two boxers and the insistence of BIG MONEY – with
millions to lose, investments to protect and opportunities to exploit – that finalized
the fight. These are the reasons why Mayweather-Pacquiao is now a reality.